Wednesday, September 15, 2010

Bank of America Mortgage Pushbacks

I couldn’t figure out why Bank of America’s (Symbol BAC) stock was acting so poorly, with the stock failing each time it rallied into the 50-day average.

It is now becoming clear why the stock has been acting so poorly –

http://www.bloomberg.com/news/2010-09-13/bofa-may-owe-20-billion-in-mortgage-buybacks-insurers-say.html

That’s right, the investors who are stuck with a bunch of the junk mortgages BofA and Countrywide (BofA bought them) originated are now trying to give them back to BofA, claiming that the original mortgages were fraudulently created with bogus numbers for such things like the income of the home buyer.

At this point, the amount of mortgages that BofA may have to eat is $20 billion. I think BofA “earned” $3 billion last quarter, so $20 billion is of material significance.

The key point here, is that stocks price in information long before it is known to the public. That is why I look at charts, because they show me what the big boys are doing with their money. You simply can't hide wide spread selling.

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